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S Montana* 
35 1*7232 Legislature* 
L72hfL Office of the 
1994 Health Facility 

Licensure Program* 

Department of , _ • 1 ^- A J--i 

Health and ice of thc Legislative Auditor 

State of Montana 




April 1994 



Report to the Legislature 



Performance Audit Report 



Health Facility Licensure Program 

Department of Health and Environmental Sciences 

This report contains recommendations for improving the review 
structure for licensing health care facilities. The 
recommendations include: 

► Designating a lead agency. 

► Clarifying regulatory standards. 

► Strengthening program administration. 



SmE DCCUMENTS .COLLECTiOj) 

SEP - 7 1934 



MCNTANA STATE LIHRAr;'/ 
1515 E. et!i AVE. 



Direct comments/inquiries to: 
Office of the Legislative Auditor 
Room 135 State Capitol 
PO Box 201705 
Helena MT 59620-1705 



93P-34 








sasiS^.r.liJATE LIBRARY 



3 0864 00089804 2 



PERFORMANCE AUDITS 



Performance audits conducted by the Office of the Legislative Auditor are designed to assess 
state government operations. From the audit work, a determination is made as to whether 
agencies and programs are accomplishing their purposes, and whether they can do so with 
greater efficiency and economy. In performing the audit work, the audit staff uses audit 
standards set forth by the United States General Accounting Office. 

Members of the performance audit staff hold degrees in disciplines appropriate to the audit 
process. Areas of expertise include business and public administration, statistics, economics, 
computer science, communications, and engineering. 

Performance audits are performed at the request of the Legislative Audit Committee which 
is a bicameral and bipartisan standing committee of the Montana Legislature. The committee 
consists of four members of the Senate and four members of the House of Representatives. 



MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE 

Senator Greg Jergeson, Chairman Representative John Cobb, Vice Chairman 

Senator Gerry Devlin Representative Ernest Bergsagel 

Senator Eve Franklin Representative Linda Nelson 

Senator Tom Keating Representative Robert Pavlovich 



^wa^ 




LEGISLATIVE AUDITOR: 
SCOTT A. SEACAT 

LEGAL COUNSEL: 

JOHN W. NORTHEY 



I 



LrWi 



i\ui urii^ 



STATE OF MONTANA 



STATE CAPITOL 

PO BOX 201705 

HELENA, MONTANA 59620-1705 

406/444-3122 

FAX 406/444-3036 



April 1994 



DEPUTY LEGISLATIVE AUDITORS: 

MARYBRYSON 
Operations and EDP Audit 

JAMES GILLETT 
Financial-Compliance Audit 

JIM PELLEGRINI 
Performance Audit 



The Legislative Audit Committee 
of the Montana State Legislature 

This is our performance audit of the Health Facility Licensure Program, 
administered by the Department of Health and Environmental Sciences. 

This report contains recommendations for improving the review structure for 
licensing health care facilities. Responses from the Governor's Office and the 
department are contained at the end of the report. 

We wish to express our appreciation to the Governor's Office and the staff of 
the department for their cooperation and assistance. 



Respectfully submitted. 




Scott A. Seacat 
Legislative Auditor 




Office of the Legislative Auditor 

Performance Audit 



Health Facility Licensure Program 

Department of Health and Environmental Sciences 



Members of the audit staff involved in this audit were Angie Grove, 
Pam Boggs, and Jim Nelson. Additional information on the audit can be 
obtained by contacting the Office of the Legislative Auditor at (406) 
444-3122. 



Table of Coatents 

List of Tables and Figures iii 

Appointed and Administrative Officials iv 

Report Summary S-1 

Introduction 1 

Audit Objectives 1 

Audit Scope and Methodology 2 

Background 5 

Health Facilities Division 5 

Licensure Bureau Responsibilities 7 

Who is Regulated by the State Licensure Program? 7 

The Licensure Process 9 

Program Funding 10 

Introduction 11 

All Health Care Facilities are not being Licensed 11 

Licensed Health Care Facilities are not Regularly 

Inspected 12 

Health Care Facilities Which do not Meet Standards 

are being Licensed 12 

Some Licensing Laws are being Inconsistently Applied . . 13 

What has Caused Program Noncompliance? 13 

Conclusion 15 

Introduction 17 

What is the Current Review Structure? 17 

What Other Entities are Involved in Reviewing Health Care 

Facilities? 19 

Other State Agencies 19 

Advocacy Groups 20 

Professional and Occupational Licensing 20 

Accreditation Organizations 20 

To What Extent Does the Licensure Bureau Rely Upon Other 

Agency Reviews? 21 

How do Other States License Health Care Facilities? 22 



Chapter I 
Introdnction 



Chapter n 
Background 



Chapter m 
Compliance Issues 



Chapter IV 
Current Review 
Structure 



Page i 



Table of Contents 



Chapter V 
Licensure Borean 
Administration 



Agency Responses 



One-Step Licensing 23 

Should the Current Review Structure Continue as is? 23 

Introduction 25 

Program Resources 25 

Areas Where Additional Information Would be Useful 25 

Program and Staffing Information 26 

Accurate Information Needed 26 

Additional Guidelines are Needed 27 

Overall Bureau Priorities 27 

Licensing Fees 28 

Fees Commensurate with Costs 28 

Minimal Licensure Fees to Cover Processing Costs 29 

Fees Related to Costs 30 

Conclusion 30 

Office the Governor 35 

Department of Health and Environmental Sciences 36 



Page ii 



List of Tables and Figures 

Type & Number of Licensed Facilities* 

As of August 1, 1993 8 

Summary of Goals Being Met By Bureau Activity 

Licensure Bureau 14 

Various Health Care Facility Types and Regulatory Agencies 18 

Health Facilities Division (DHES) 6 



Table 1 



Table 2 



Table 3 



Figure 1 



Page iii 



Appointed and Administrative Officials 



Department of Health Bob Robinson, Director 

and Enyironmental 

Sciences Denzel Davis, Administrator, Health Facilities Division 

Roy Kemp, Chief, Licensure Bureau 



Page iv 



Report Summary 



Introduction 



A performance audit of the health care facility licensure 
function at the Department of Health and Environmental 
Sciences (DHES) was requested by the Legislative Audit 
Committee. The initial health care facility licensing system was 
created by the legislature in 1947 to ensure a minimum quality 
of care at hospital facilities, as well as to ensure the safety of 
patients. Specific health care facility licensing duties have been 
assigned to the Licensure Bureau within the Health Facilities 
Division. This bureau is responsible for conducting license 
inspections and complaint investigations. 



Compliance Issues 



We tested compliance with the various licensure and regulatory 
requirements in state laws and rules. Our testing included file 
reviews, staff interviews, interviews with various facility 
personnel and review of information from other Montana 
agencies and health care licensing agencies in other states. 
During this testing, we noted several concerns relating to 
program compliance: 

-- Some health care facilities are operating without a license. 

— Facility inspections are not always conducted. 

-- Certain facilities not meeting standards are licensed. 

-- Some laws are inconsistently applied. 



What has Caused 

Program 

Noncompliance? 



Program noncompliance issues are in part due to a disjointed 
review structure for health care facility regulation and 
weaknesses in administering the Licensure program. When the 
licensing statutes were instituted, there was limited government 
oversight and a limited number of health care facilities operating 
in Montana. Since that time the health care industry and its 
related regulation have changed and expanded significantly. 
Health care services are no longer limited to hospitals. There are 
at least 22 different types of health care facilities operating in 
this state. With this growth in services there has been an 
accompanying growth in health care regulation. 



Page S-1 



Report Summary 



Initially the department was the agency with primary statutory 
oversight and enforcement authority for health care facility 
regulation. The oversight structure now includes several 
different groups and agencies. It appears the state's licensure 
program has not kept pace with these changes, which has 
contributed to the bureau's inability to fully and consistently 
carry out its duties and comply with state laws. Currently the 
Licensure Bureau relies on the regulation conducted by other 
state agencies. However, there has been no formal assurance that 
this regulation meets the needs of the Licensure Bureau. 



Should the Current 
Review Structure 
Continue As Is? 



The state should take steps to improve the health care facility 
licensure process by ensuring coordination of licensure functions 
between various involved agencies. The process should ensure 
facility compliance with state and federal standards to meet the 
program's mission of protecting the people of Montana. Due to 
extensive changes in how health care is provided and due to 
several state agencies sharing overall regulation, we believe the 
Governor should revisit the concept outlined in the one-step 
licensing statutes. The Governor could do this by designating a 
lead agency for health care facility regulation. Specific 
responsibilities need to be assigned to ensure all oversight and 
regulation of facilities is coordinated. Specific steps should be 
taken to address noted areas of noncompliance with licensing 
laws. Coordination should provide for minimal effort by all 
agencies by relying on the inspections and surveys of other 
regulators. The designated lead agency can take steps to identify 
areas which may require additional rule development. 



Licensure Bureau 
Administration 



We identified several areas where additional steps could be taken 
to strengthen the administration of the Licensure Bureau. The 
bureau has not yet developed a system to manage and monitor its 
activities, project resource needs, establish procedures, or 
evaluate its performance. We also found there are limited 
guidelines available for licensure staff. All bureau goals have 
not been addressed or fully developed and; therefore, staff 
priorities are continually changing. 



Page S-2 



Report Summary 



Because the Licensure Bureau is an integral component of 
Montana's health care regulation, we believe improvements need 
to be made to assure program goals are achieved. By 
strengthening some of the management controls over this 
program, the bureau could improve their efficiency and impact 
the need for additional resources. Without clear priorities and 
established guidelines, bureau activities will be less effective. 
To strengthen program administration, the department should: 



— Establish a system to accurately track and update program 
and staffing information; 

— Develop formal policies and procedures for program staff; 
and, 

-- Develop a plan which addresses bureau priorities and helps 
assure compliance with all licensure requirements. 



Licensing Fees The legislature established a licensing fee system in 1947 when it 

established a health care facility licensure program. The original 
fee was established at $10 per facility and increased once in 1967 
to $20 per facility. In 1975 the law was amended to require any 
facility planning to operate with more than 20 patient or resident 
beds pay an extra $1 for each additional bed. Department staff 
indicated limited funding has impacted the ability of the 
program to enforce its statutory requirements. Limited funding 
can restrict the staff and resources to actively regulate health 
care facilities. Based on our review, we believe there are three 
funding options that can be considered for this program. These 
options include establishing: 

— Fees commensurate with program costs; 

— Minimal licensure fees to cover processing costs; 

— Fees related to program costs. 

The current health care facility licensing fee structure has not 
been altered since 1975 and the base fee of $20 has not been 
changed since 1967. The value of $1.00 in 1967 is equal to a 
little less than 24 cents in 1992. Just to maintain the "purchasing 
power" of the license fee, the fee should be approximately $84. 

Page S-3 



Report Summary 



We believe the department should seek legislation to make all 
fees consistent and commensurate with program costs, or set all 
health care facility licensing fees to cover processing costs, or 
establish fees at a certain percentage of program costs. 



Page S-4 



Chapter I 
Introduction 



Introdnction 



A performance audit of the health care facility licensure func- 
tion at the Department of Health and Environmental Sciences 
(DHES) was requested by the Legislative Audit Committee. 
Preliminary audit work concentrated on the department's Health 
Facilities Division. This division includes the Certification 
Bureau and the Licensure Bureau. During our planning work we 
noted the Certification Bureau has comprehensive policies and 
procedures, management information is compiled and used, staff 
are adequately supervised, and program effectiveness is regularly 
monitored by federal review staff. We were unable to identify 
these controls in the Licensure Bureau. We therefore concen- 
trated our review in that area. This chapter outlines prescribed 
audit scope and objectives for audit work related to the health 
facilities licensing program of the Licensure Bureau. 



Audit Objectives 



During our preliminary work we addressed the following ques- 
tions: 

1. Are there facets of health care licensure that could be 
coordinated or consolidated between government agencies? 

2. Is the department in compliance with current licensing 
requirements? 

Program effectiveness and efficiency were examined during our 
preliminary planning. After initial audit work was completed, 
we noted significant areas of noncompliance with state laws and 
rules. We also identified areas where several programs/agencies 
perform similar functions. Based on this work, it did not appear 
the health facilities licensing program was effective in meeting 
its intended purpose. We therefore, expanded our audit work to 
address one additional question: 

3. Does the current state health care facility licensure program 
meet legislative intent? 



Page 1 



Chapter I 
Introduction 



Audit Scope and Meth- 
odology 



This audit was conducted in accordance with government audit- 
ing standards for performance audits. We compiled general 
background information on current licensure of health care 
facilities and identified relevant laws and rules. Interviews were 
conducted with staff to gain an understanding of the operations 
of the Licensure Bureau. We also contacted other state and local 
government agencies that conduct some form of regulation of 
health care facilities. 



We examined DHES compliance with those statutes and rules 
which directly relate to actual licensing procedures. Compliance 
testing concentrated on bureau procedures to ensure compliance 
at the facility level. We examined department procedures for 
identifying facilities that are operating without a required 
license, for assessing penalties for facility noncompliance, and 
for ensuring timely licensing inspections. We reviewed phone 
books and other sources of health care facility information to 
identify health care facilities which were potentially operating 
without a license. 

We did not test for compliance at the facility level. We 
examined the procedures used by department staff to ensure 
compliance during their on-site inspections of facilities. 

We conducted phone interviews with other states to determine 
how their licensing processes compared with Montana's current 
operations. We also compared Montana statutory requirements to 
requirements in other comparable states. 

We contacted a sample of various health care facilities to deter- 
mine what types of licenses they are required to obtain. This 
sample included nursing homes, rural health centers, mammo- 
graphy labs, etc. We documented the different inspections 
conducted on the facilities and operations and the entities 
involved in the inspections. We compared the licensing require- 
ments and duties of other state agencies to DHES licensing 
requirements. We reviewed the various licensing standards, 
survey forms, and licensing procedures for regulating health 
facilities used by the Licensure Bureau and other state agencies. 



Page 2 



Chapter I 
Introduction 

We contacted a sample of county health departments and local 
building and fire code inspectors. We compared their standards 
and survey procedures to those methods followed by Licensure 
Bureau staff. 

We identified areas where duplication may occur between 
various agencies. We identified other regulation that may be 
relied upon to provide oversight for health care facilities. The 
one-step licensing criteria outlined in section 50-8-102, MCA, 
was examined and compared to current operations. This law 
specifically states a one-step licensing office shall facilitate 
intra-departmental certifications for licensure. One-step licens- 
ing would include coordination of all governmental licensing 
functions, state and local, required for licensure. Coordination 
may also include sharing the responsibility for inspections, 
reviews, and application processing by other agencies. 



Page 3 



Chapter 11 
Background 



Background 



The Department of Health and Environmental Sciences (DHES) 
was created to protect and promote the health of the people of 
Montana. The department is responsible for implementing 
public health programs and enforcing public health regulations. 
One system of health care regulation used by the department is 
licensure of health care facilities. The initial licensing system 
was created by the legislature in 1947 to ensure a minimum 
quality of care at hospital facilities, as well as to ensure the 
safety of patients. 



Health Facilities Division 



DHES health regulation duties have been divided among four 
divisions. These divisions include Centralized Services, Envi- 
ronmental Sciences, Health Services, and Health Facilities. The 
Health Facilities Division is responsible for general oversight of 
health care facilities. The following organizational chart outlines 
the Health Facilities Division structure. 



Page 5 



Chapter n 
Background 



Figure 1 
Health FacHities Division (DHES) 



Health Facilities 

Division 
Administrator 



Support 
Services 



Licensure 
Bureau Chief 



Certification 
Bureau Chief 



Administrative 
Aide 



Construction 
Surveyor 



Facility Surveyors 



Long-Term Care 
Surveyors 



Non-LTC 
Surveyors 



Field Offices 



Fire, U(e, Safety 
Surveyors 



Source: Ccnpiled by the Office of the Legislative Auditor 



Historically the Licensure and Certification Bureaus operated as 
one unit and regulatory duties were performed concurrently by 
all staff. The department separated the various duties into two 
separate bureaus in May 1992. This separation established a 
Licensure Bureau to ensure the state licensing program was not 
being funded by the federal certification program. 

The Certification Bureau assures federal Medicaid and Medicare 
requirements are followed at applicable health care facilities. 
Certification reviews concentrate on compliance with federal 
regulations addressing patient care and safety. (Certification 
duties are further discussed in Chapter IV.) 



Page 6 



Chapter II 
Background 



Licensure Bureau Respon- There are currently five full-time employees in the Licensure 

sibilities Bureau. Staff include a bureau chief, a building construction 

surveyor, two health care facility surveyors, and an administra- 
tive aide. The administrative aide tracks facility license 
applications and license renewals. Health facility surveyors 
conduct license inspections and complaint investigations at the 
facilities. The building construction surveyor reviews facility 
construction or renovation plans and conducts building inspec- 
tions. In addition to managerial duties, the bureau chief is 
responsible for developing administrative rules and bureau 
reports. Goals for the bureau include: 

1. Update and clarify state licensure standards for health care 
facilities and services. 

2. Conduct compliance surveys of health care facilities and 
services to assure the safety of residents/patients. 

3. Assist new or potential providers to ensure Montana 
standards will be met. 

4. Review and approve renovation or new construction plans 
of health care facilities. 

5. Investigate complaints regarding licensed health care facili- 
ties. 

6. Provide a variety of consultative and technical assistance to 
health care providers, potential providers, consumers, and 
the general public. 



Who is Regulated by the A health care facility is generally defined in section 50-5-101, 

State Licensure Pro- MCA, as: 



gram? 



". . .any institution, building, or agency or portion 
thereof, private or public, excluding federal facilities, 
whether organized for profit or not, used, operated, or 
designed to provide health services, medical treat- 
ment, or nursing, rehabilitative, or preventive care to 
any person or persons. The term does not include 
offices of private physicians or dentists. The term 
includes but is not limited to ambulatory surgical 



Page 7 



Chapter II 
Background 



facilities, health maintenance organizations, home 
health agencies, hospices, hospitals, infirmaries, 
kidney treatment centers, long-term care facilities, 
medical assistance facilities, mental health centers, 
outpatient facilities, public health centers, rehabilita- 
tion facilities, residential treatment facilities, and 
adult day-care centers." 

Currently there are at least 22 different types of health care 
facilities/providers offering services in Montana. Over 300 
health care facilities are licensed including hospitals, home 
health agencies, and nursing homes. The following list outlines 
the various facilities licensed. 



Table 1 




Type & Nuitier of Licensed Facilities* 




As of August 1. 1993 


Type 


L i censed 


Adult Day Care Center 


25 


Annbulatory Surgical Facility 


7 


Chemical Dependency Facility 


6 


Home Health Agency 


46 


Home Infusion Services 


1 


Hospice 


19 


Hospital 


55 


Infirmary 


2 


Kidney Treatment Center 


7 


Medical Assistance Facility 


5 


Mental Health Center 


8 


Nursing Home 


103 


Outpatient Facility 


8 


Outpatient Radiation Facility 


1 


Personal Care Homes 


28 


Rehabilitation Facility 


1 


Residential Treatment Facility 


3 


Specialty Mental Health Facility 


1 


Total 


326 


* Four facility types do not have any facilities 


currently 


licensed. 




Source: Licensure Bureau, Department of Health and Environmental 


Sciences 





Licensing requirements apply to health care facilities as defined 
in state law. There are no facility licensing requirements for 
offices of private physicians or dentists. The only other health 



Page 8 



Chapter n 
Background 



care facilities specifically excluded from the state licensure 
requirements are federally-operated facilities. 



The Licensure Process Section 50-5-201, MCA, states a person may not operate a health 

care facility unless that facility is licensed by the department. 
To obtain a state license, a formal application and a $20 license 
fee must be sent to the Licensure Bureau 30 days prior to open- 
ing the facility. Facilities planning to operate with more than 
twenty patient or resident beds must pay an extra $1 for each 
additional bed. 

After an application is received, the Licensure Bureau is 
required to conduct a compliance inspection of the facility 
within 45 days. In order for Licensure staff to observe opera- 
tions and ensure compliance with licensing statutes, rules and 
standards, the facility should be operating and serving patients 
or residents. Although standards vary for different types of 
facilities, there are some general requirements that must be 
observed by all health care facilities. These standards include 
the following: 

Construction and remodeling requirements. 

Food service requirements. 

Blood bank and transfusion services. 

Communicable disease control. 

Medical record maintenance. 

Physical plant and equipment maintenance. 

Environmental control requirements. 

Disaster plan procedures. 

Laundry and bedding controls. 

Licensure inspections are to be unannounced in order to observe 
actual operations. All records and building areas must be open 
to state licensure inspection at all reasonable times. 

Current statutes say "licenses may be issued for a period of one 
to three years in duration." At the end of each license period, 
facilities are required to renew their licenses and pay required 
fees. Licensure Bureau staff are mandated to conduct renewal 
inspections of all facilities to ensure on-going compliance with 
state health care standards. Facilities are required to correct any 

Page 9 



Chapter n 
Background 



areas of noncompliance identified during these inspections. The 
bureau has the option of issuing a provisional license for a 
period less than one year when minimum standards are not 
completely followed. When health care standards are not met, 
bureau staff request a plan of correction be developed by the 
facility. Documentation of operational changes or additional on- 
site inspections may be required for license approval. 

A license may be denied, suspended, or revoked if a facility does 
not meet the specified standards. For example, section 50-5- 
207, MCA, states a license may be revoked if there is insuffi- 
cient or unqualified facility staff. There are also restrictions 
regarding the transfer of licenses. A facility license may not be 
sold, assigned, or transferred. Upon closing or transferring 
ownership of a facility, the license must be returned to the 
department. 

Any licensee considering renovation or construction of a health 
care facility is required to submit plans for preliminary inspec- 
tion and approval. All new and remodeled health care facilities 
must be examined to determine compliance with building and 
safety codes. 



Program Funding 



Licensing operations are funded solely through the General 
Fund. Funding for the Licensure Bureau for fiscal year 1993-94 
is $353,035. The Licensure Bureau collected approximately 
$15,000 in licensing fees for fiscal year 1992-93. The fees 
collected are deposited directly into the General Fund. 



Page 10 



Chapter HI 
Compliance Issues 



Introduction 



During our audit of the Licensure Bureau in the Health Facilities 
Division, we tested compliance with the various licensure and 
regulation requirements in state laws and rules. Our testing 
included file reviews, staff interviews, interviews with various 
facility personnel and review of information from other 
Montana agencies and health care licensing agencies in other 
states. During this testing, we noted several concerns relating to 
program compliance: 

Some health care facilities are operating without a license. 
Facility inspections are not always conducted. 
Certain facilities not meeting standards are licensed. 
Some laws are inconsistently applied. 

These concerns are due to the department not keeping pace with 
health care regulation and the changes occurring in the current 
review structure. The following sections outline our findings in 
each of the compliance areas. We further discuss the cause of 
these problems in the next chapter. 



All Health Care Facilities 
are not being Licensed 



Section 50-5-201, MCA, states "a person may not operate a 
health care facility unless the facility is licensed by the depart- 
ment." Through staff interviews and phone calls to various 
health care facilities, we determined there is significant 
noncompliance with this statute. We identified over 30 health 
care facilities that currently operate without a state license. 
Department staff indicated they are aware of at least 50 facilities 
operating without a license. These facilities include nursing 
homes, abortion clinics, community mental health clinics, and 
physical therapy clinics. These facilities were identified through 
a review of various phone books, health care association infor- 
mation, and information from other state agencies. 

After further review of department files, we identified a nursing 
home in operation which provides services without a state 
license. This facility was first reviewed by department staff in 
1985. Another staff visit occurred in 1990. These inspections 
were conducted due to receipt of complaints regarding patient 
care and building code violations. No action has been taken by 

Page 11 



Chapter m 
Compliance Issues 



the department to enforce the licensure requirement for this 
facility. The bureau's licensing practice has been to provide 
copies of related laws to those facilities which request informa- 
tion and leave it up to the facility to apply for a license. Bureau 
staff do not routinely followup on these facilities. 



Licensed Health Care 
Facilities are not 
Regularly Inspected 



Section 50-5-204, MCA, requires initial inspections of health 
care facilities within 45 days after a licensure application is 
received. This statute also requires inspections for all facilities 
that apply for license renewal. During our file review and phone 
calls to operating health care facilities, we found initial inspec- 
tions are not generally conducted within any specific time limits 
or are not conducted at all. For example, an adult day care 
center in Helena had been licensed for over eight months and no 
inspection had been conducted. Of 16 new facilities applying 
for licensure in fiscal year 1992-93, we noted five facilities that 
did not receive initial inspections in accordance with state law. 



We also found inspections are not always conducted for license 
renewal as required in section 50-5-204, MCA. Current bureau 
practice is to issue renewals for all applications without any 
documented inspection. There are currently over 300 licensed 
facilities, but licensure staff conduct only 45-50 inspections 
annually. 



Health Care Facilities 
Which do not Meet 
Standards are being 
Licensed 



In March 1993 the bureau requested a hospital to "voluntarily" 
relinquish its license due to extensive noncompliance with 
hospital and health care standards noted during a Medicaid 
certification review. No inspection was conducted by Licensure 
Bureau staff, and a license was renewed in April 1993. This is 
contrary to section 50-5-204, MCA, which requires an 
inspection of the facility prior to license renewal. No additional 
file documentation was available to indicate the hospital had 
corrected the previously noted noncompliance areas. We were 
unable to document any attempt by the department to ensure the 
hospital met minimum standards or was in compliance with 
Minimum Standards For a Hospital (ARM 16.32.320) prior to 
issuance of a renewal license. 



Page 12 



Chapter m 
Compliance Issues 



Other examples of licensed facilities not meeting applicable 
licensing standards were documented during our file review. 
One example noted a hospice facility which applied for license 
renewal, but was not able to meet current licensure require- 
ments. Communications from bureau staff stated no licensing 
survey would be conducted or would be planned due to the 
limited services provided by that facility. However, the facility 
was issued a provisional license in the event the facility was 
"asked to provide or coordinate hospice services." 



Some Licensing Laws are 
being Inconsistently 
Applied 



Some licensing laws appear to be inconsistently applied. Depart- 
ment files included facilities which are certified to provide 
health care paid for by Medicaid and Medicare but are not 
licensed by the department as a health care facility. For 
example, rural health clinics are certified to provide 
Medicaid/Medicare services, but no state license is obtained by 
these facilities. 



Another related inconsistency was that some facilities of a 
certain type are licensed, while other similar facilities are not 
licensed. For example, there are nine outpatient facilities 
certified by the department as operating with Medicaid and 
Medicare certification, but only seven of these facilities have a 
state license. 



What has Caused Pro- 
gram Noncompliance? 



When the licensing statutes were instituted, there was limited 
government oversight and a limited number of health care 
facilities operating in Montana. In 1947 when this program was 
established, the statutes included only hospitals. Since that time 
the health care industry and its related regulation have changed 
and expanded significantly. Health care services are no longer 
limited to hospitals. There are at least 22 different types of 
health care facilities operating in this state. With this growth in 
services there has been an accompanying growth in health care 
regulation. 



Initially the department was the agency with primary statutory 
oversight and enforcement authority for health care facility 

Page 13 



Chapter m 
Compliance Issues 



regulation. The oversight structure now includes several 
different groups and agencies. It appears the state's licensure 
program has not kept pace with these changes, which has 
contributed to the bureau's inability to fully and consistently 
carry out its duties and comply with state laws. 

In addition, comparing bureau activities to its own outlined 
program goals, we found some goals are being met while others 
are not addressed. The following chart outlines bureau goals and 
the related bureau success in addressing those goals. 



1 Table 2 








Sumary of Goals Being Met By Bureau Activity 


Licensure Bureau 








GOALS 




HAS 


BUREAU MET GOAL? 


1. Update & Clarify All Standards 






NO 


2. Conduct Surveys of All Facilities 






No 


3. Assist New or Potential Providers 






Partially 


4. Review/Approve Construction Plans 






Yes 


5. Investigate Facility Complaints 






Yes 


6. Provide Technical Assistance 






Partially 


Source: Coipiled by the Office of the 


Leg 


islat 


ive Auditor frcin 


department records 









We noted bureau staff do review and approve construction and 
remodel plans for health care facilities. Other program goals 
such as updating and clarifying licensure standards and 
conducting compliance surveys are not being met. 

The department has not developed a strong and coordinated 
enforcement and regulatory function. The bureau has no goal to 
license all health care facilities to ensure compliance with 
current statutes. Currently, it does not appear the department 
has coordinated activities to provide a state oversight program 



Page 14 



Chapter in 
Compliance Issues 



which ensures the consumers of health care that a facility meets 
minimum safety standards. 



Conclusion These compliance issues are in part due to a disjointed review 

structure for health care facility regulation and weaknesses in 
administering the program. The next two chapters discuss the 
changes needed for better regulatory coordination and the need 
for improvements in administration. By taking these steps, a 
more effective review structure can be developed to ensure 
noncompliance issues are corrected. 



Page 15 



Chapter IV 
Current Review Structure 



Introduction 



Current statutes suggest the primary reason the legislature 
established a licensing program for health facilities was to 
promote the safety and welfare of residents or patients. A state 
license is to be issued when minimum standards of care are met 
at facilities. However, based on our audit findings, it appears 
the licensure program is not completely performing as intended. 
Specifically: 

Some health care facilities are operating without licenses. 
Facility inspections are not always conducted. 
Certain facilities not meeting standards are licensed. 
Some laws are inconsistently applied. 

In addition, the licensing program needs to operate in conjunc- 
tion with a number of other regulatory agencies and groups. 
This chapter discusses the need to address changes in both the 
types of health care providers and the statewide health care 
review structure. 



What is the Current 
Review Structure? 



Some of the problems in health care facility regulation can be 
attributed in part to the growth and changes in health care 
oversight. Section 50-5-101, MCA, which includes the defini- 
tion of a health care facility, has been amended during every 
legislative session since 1967. This law now specifically includes 
22 different health care facility types. By adding all these 
different facility types, the legislature has placed additional 
responsibility on the department to develop timely and 
comprehensive rules and procedures to provide for the safety 
and welfare of patients. 



In addition to the growth in health care providers, there have 
been significant changes in health care regulation. Various 
agency programs and groups were created to address some of the 
more specific aspects of health facility regulation. 



We contacted a sample of health care facilities to determine what 
types of licenses they are required to obtain. This sample 
included nursing homes, rural health centers, mammography 
labs, etc. We documented the different inspections conducted of 

Page 17 



Chapter IV 

Current Review Structure 



the facilities and operations and the entities involved in their 
regulation. The following chart outlines various agencies which 
have varying degrees of regulatory oversight over health 
facilities and services. We included some facilities that are not 
currently defined in the licensing statutes as health care facilities 
but the level of care being provided could raise potential health 
care concerns at these facilities. 



Table 3 
Various Health Care Facility Types and Regulatory Agencies 










/ 


Hospitals 


X 


X 


X 


X 


X 


X 


















Nursing Homes 


X 


X 


X 


X 




X 




X 


X 


X 








Home Health 


X 


X 


X 


X 








X 


X 


X 








Physician Office 






X 


X 




















Laboratones 




X 


X 


X 




















Personal Care 


X 




X 


X 


X 






X 


X 










Adult Foster 








X 










X 




X 






Adult Day Care 


X 




X 


X 










X 










Mental Health 


X 




X 


X 






X 


X 










X 


Retire Homes 






X 


X 




X 




X 










X 


Chem. Depend 


X 




X 


X 








X 








X 




Resident. Treat. 


X 




X 


X 








X 












Abortion Clinic 




X 


X 


X 




















Mammography 




X 


X 


X 




















Physical Ther. 


X 


X 


X 


X 




















Rural Health 




X 


X 


X 




















Source: Conpiled by the Office of the Legislative Auditor 





Page 18 



Chapter IV 
Current Review Structure 



What Other Entities are 
Involved in Reviewing 
Health Care Facilities? 



As noted in table 3, the Licensure Bureau is no longer solely 
responsible for ensuring the safety and welfare of patients and 
residents in all health care facilities. Other entities involved 
include regulatory agencies, advocacy groups, and accreditation 
organizations. 



Other State Agencies 



Certificate of Need staff at the Department of Health and Envi- 
ronmental Sciences initially examine construction or remodeling 
plans for some health facility types. This review concentrates on 
cost containment and accessibility of health care services. 



Facilities that are federally certified to provide Medicare or 
Medicaid services are reviewed periodically by Certification 
Bureau staff. Approximately 200 of the licensed facilities in 
Montana are reviewed by Certification staff annually. These 
certification reviews address federal regulations relating to 
health, medication, safety and staffing requirements. 

In addition, the Chemical Dependency Division at the Depart- 
ment of Corrections and Human Services conducts annual 
reviews of chemical dependency treatment centers. The Mental 
Health Division, also at the Department of Corrections and 
Human Services, examines procedures at community mental 
health centers. 

The state's Fire Marshall staff at the Department of Justice are 
required to conduct annual fire safety inspections of commercial 
buildings. 

Staff in the Building Codes Bureau at the Department of 
Commerce examine all commercial building plans, which 
includes hospitals, nursing homes, and other types of health 
facilities. 



The Department of Health's Food and Consumer Safety Bureau 
and/or local, county, or district health officers or sanitarians 
have authority to inspect the operations of establishments serving 
food and beverages. These inspections cover food, personnel. 

Page 19 



Chapter IV 

Current Review Structure 



food equipment and utensils, sanitary facilities and controls, 
construction, fixtures and housekeeping. 



Advocacy Groups 



There are various advocacy groups that have been formed to 
serve as "watchdogs" for various state and federal acts that have 
been implemented. For example, the Mental Disabilities Board 
of Visitors is charged by Montana law to review patient care at 
community mental health centers, as well as the institutions for 
the mentally ill and the developmentally disabled. The Mental 
Commitment and Treatment Act (Title 53, chapter 21, MCA) 
and the Developmental Disabilities Act (Title 53, chapter 20, 
MCA) provide guidelines and procedures for the Board. The 
Montana Advocacy Program also focuses on services to people 
with mental disabilities. The Department of Family Services' 
Aging Services Unit focuses on senior citizens and monitoring 
services covered by the federal Older American Act. 



Professional and Occupa- 
tional Licensing 



In addition to regulation of facilities, there is regulation of 
health care practitioners through professional licensing boards 
and peer review associations. There are currently licensing 
boards for pharmacists, physicians, radiologic technologists, 
nurses, physical therapists, nursing home administrators, and 
occupational therapists. These boards can conduct peer reviews 
and complaint investigations of their related professions. 



Accreditation 
Organizations 



Another form of peer review is conducted by health accredita- 
tion organizations which can conduct surveys and inspections to 
ensure national health care standards are met. Health care 
facilities may voluntarily pay for an accreditation review to 
verify the quality of care offered at their facility. The primary 
health care accreditation organization utilized by facilities in 
Montana is the Joint Commission on Accreditation of Health 
Care Organizations (JCACHO). JCACHO is recognized by the 
state of Montana for ensuring the quality of health care opera- 
tions in applicable facilities. There are currently sixteen hospi- 
tals certified by JCACHO in this state. 



Page 20 



Chapter IV 
Current Review Structure 



To What Extent Does 
the Licensure Bureau 
Rely Upon Other 
Agency Reviews? 



Currently the Licensure Bureau relies on the regulation 
conducted by some other state agencies. However, there has 
been no formal assurance this regulation meets the needs of the 
Licensure Bureau. 

For example, some reviews are completed by Department of 
Corrections and Human Services staff from the Mental Health 
Division and the Chemical Dependency Division for applicable 
facilities. In the past, the Licensure Bureau did not always 
define the roles of these various agencies or take steps to ensure 
these reviews address state licensure requirements. New agree- 
ments with more specific guidelines are currently being 
developed. 

Section 50-5-103, MCA, also allows the Licensure Bureau to rely 
on the surveys of health care facilities conducted by the Joint 
Commission on Accreditation of Health Care Organizations 
(JCACHO) accreditation association. This association primarily 
conducts reviews of hospitals. The bureau is relying on reviews 
conducted by this association. 

As noted previously, the department separated the Certification 
and Licensing functions in May of 1992. The Licensure Bureau 
continues to rely on the Certification Bureau to regulate the 
majority of health care facilities even though there is no formal 
agreement outlining the licensing requirements which need to be 
met. The Certification Bureau has developed survey protocols 
for the various facilities it reviews to ensure all applicable 
federal standards are met. Federal protocols appear to be more 
extensive than most state standards for some facility types. 
Certification reviews generally address patient records, dietary 
services, medication services, resident rights assurance, staff 
qualifications and organization, physical plant and equipment 
maintenance, and quality of care assessments. 



Although the bureau is relying on these other agencies in some 
areas, there have been no formal agreements which outline the 
requirements or standards that have to be met at those facilities. 
Based on our interviews with staff at these other agencies, there 

Page 21 



Chapter IV 

Current Review Structure 



are several areas which may not be examined during the various 
reviews. For example, reviews of mental health facilities 
conducted by Department of Corrections and Human Services 
staff focus on their contract terms rather than specific licensing 
requirements. 

Another area where the bureau is not fully coordinating with 
other agencies is building code reviews. Although Building 
Codes Bureau staff review all health care facility construction 
plans, the Licensure Bureau still conducts its own construction 
reviews for hospitals and nursing homes. 

With the activities of these other agencies, there are only limited 
health care facility types which are mainly the responsibility of 
the Licensure Bureau. Personal care homes and adult day care 
homes are not inspected regularly by other agencies. Bureau 
inspection reviews have concentrated on these facilities in the 
past two years. 



How do Other States 
License Health Care 
Facilities? 



We contacted seven other states to review the level of health care 
facility licensing programs operated. We contacted three states 
from the same region as Montana, as well as four other states the 
department identified as having licensing issues similar to 
Montana. All seven of the contacted states require some form of 
annual state health care licensure for some facility types. Every 
state is licensing hospitals, nursing homes, and home health 
agencies. Requirements for other facility types varied 
extensively. 



Federal oversight has grown extensively at the state level to 
ensure compliance with Medicaid and Medicare standards. 
Other states we contacted operate their state health facility 
licensure program in conjunction with their federal certification 
programs. In general, the federal program has become "the lead 
agency" in state health facility regulation. 



Page 22 



Chapter IV 
Current Review Structure 



One-Step Licensing 



In 1982, the legislature studied the efficiency and consistency of 
the licensing system, including fire safety and health-sanitation 
reviews. Based on this study, the legislature passed one-step 
licensing laws. Section 50-8-102, MCA, requires a one-step 
licensing process for all facilities under the jurisdiction of 
Department of Health and Environmental Sciences, Department 
of Corrections and Human Services, and the Department of 
Family Services. 



Our audit found limited formal efforts to address compliance 
with these statutes. Although there are one-step licensing 
requirements outlined in sections 50-8-101 through 50-8-105, 
MCA, there has been no one group or agency appointed as "in- 
charge" of licensing regulation. 



Should the Current 
Review Structure 
Continue as is? 



There are several areas where Montana health care facility 
standards need to be updated to reflect current health care 
industry operations. Administrative rules for some types of 
health care facilities have not kept pace with changes in 
procedures. Agency staff also noted that standards need to 
reflect or incorporate standards that have been established by the 
other regulatory agencies. For instance, DHES standards relating 
to mental health and chemical dependency facilities had not been 
updated and coordinated with standards that have been 
developed by the Department of Corrections and Human 
Services. 



Another example relates to infectious waste management. 
Section 75-10-1006, MCA, states the department responsible for 
licensing health care facilities shall require each licensee to 
comply with the Infectious Waste Management Act. Most health 
facilities handle infections wastes. For example, hospitals have 
blood samples and syringes which should be disposed of 
properly. We found the bureau has not developed standards for 
staff and facility operators to follow in this area. 

Based on our audit findings, we conclude the state should have a 
health care facility licensure process that coordinates licensure 



Page 23 



Chapter IV 

Current Review Structure 



functions between the various involved agencies. The process 
should also ensure facility compliance with state and federal 
standards to meet the program's mission of protecting the people 
of Montana. Due to extensive changes in how health care is 
provided and due to several state agencies sharing overall regula- 
tion, we believe the Governor should revisit the concept outlined 
in the one-step licensing statutes. The Governor could do this 
by designating a lead agency for health care facility regulation. 
Specific responsibilities need to be assigned to ensure all 
oversight and regulation of facilities is coordinated. Specific 
steps should be taken to address noted areas of noncompliance 
with licensing laws. The designated lead agency can take steps 
to identify areas which may require additional administrative 
rule development. 



Recommendation #1 

We recommend the Governor: 

A. Designate a lead agency for health care facility 
regulation, 

B. Direct the lead agency to formally coordinate the 
regulatory efforts and assure compliance with 
licensing statutes, and 

C. Direct the lead agency to identify and clarify all 
related health care rules related to facility standards. 



Page 24 



Chapter V 
Licensure Bureau Administration 



Introdaction 



Throughout the course of this audit, we identified areas where 
additional steps could be taken to strengthen the administration 
of the Licensure Bureau. Because the Licensure Bureau is an 
integral component of Montana's health care regulation, we 
believe improvements need to be made to assure program goals 
are achieved. This chapter outlines actions that could improve 
program administration. 



Program Resources 



During the audit, we examined the need for additional staff and 
resources in this program. With only five staff devoted to the 
overall licensing duties for all health care facilities, it appears 
staff and resources are limited. However, additional coordina- 
tion with other agencies and programs could impact the staffing 
needs of this bureau. In addition, we noted some other issues 
which could impact staffing and resource needs. These issues 
are discussed in the following sections. By strengthening some 
of the management controls over this program, the bureau could 
improve their efficiency and impact the need for additional 
resources. 



Areas Where Additional 
Information Would be 
Useful 



The Licensure Bureau has been in operation, separate from 
Certification Bureau, since May 1992. The bureau has not yet 
developed a system to manage and monitor its activities, project 
resource needs, establish procedures, or evaluate its performance. 
The bureau does not have information on many of the important 
activities it conducts. Without this information, the bureau will 
not be able to project resources and budget needs for the future. 
For example, the bureau does not know: 

— What percentage of time inspectors spend on administrative, 
inspection, or technical assistance activities. 

— What type of deficiencies are noted by facility type or the 
percentage of facilities that have similar deficiencies. 

-- The length of time needed to perform an in-depth survey 
for an adult day care facility versus a personal care home. 



Page 25 



Chapter V 

Licensure Bureau Administration 



The number of health care facilities that are inspected by 
other state agencies. 



Program and Staffing 
Information 



We believe the bureau should compile licensure statistics and 
inspection data to assist in evaluating program activities and 
ensuring provider compliance. For example, if the bureau 
should find out that 30 percent of an inspector's time is spent on 
administrative tasks, then bureau management may decide it 
needs an administrative assistant instead of another inspector. If 
inspectors spend 40 percent of their time with technical assist- 
ance, then the bureau may decide to provide formal seminars for 
health care providers. Staffing levels impact the ability of this 
program to maintain compliance with program requirements, but 
current staffing levels cannot be reviewed until further informa- 
tion is available and the current health facility regulation 
structure is defined as discussed in Chapter IV. 



Accurate Information 
Needed 



During our file review, we also noted outdated or incomplete 
information. During phone calls to health care facilities, we 
noted some health care facilities were no longer operating or had 
changed ownership. Steps should also be taken to ensure the 
bureau is collecting comprehensive and accurate facility data. 



Recommendation #2 

We recommend the department establish a system to: 

A. Identify program and staffing information needed to 
make management and policy decisions. 

B. Accurately collect and update facility information. 



Page 26 



Chapter V 
Licensure Bureau Administration 



Additional Guidelines 
are Needed 



We found there are limited guidelines available for licensure 
staff. There are several areas where specific procedures would 
ensure consistency and assist staff decision-making. We noted 
there were no guidelines for: following up on inspection 
findings, issuing provisional licenses, or handling complaints 
relating to health care facilities. 



An area where licensing policy should be developed is criteria 
for issuing one, two, or three year licenses. Currently the law 
states that the bureau may issue licenses for one to three years, 
but no formal guidelines have been developed to establish clear 
criteria on when a three year license would be more appropriate 
than a one year license. Staff interviews indicated that currently 
the decision is made based on historic inspection information 
and past licensing trends of the facility. 

Specific guidelines would help personnel perform duties in a 
consistent and accurate manner. Staff interviews indicated some 
inconsistencies and questions relating to specific program 
operations. Established procedures strengthen management's 
control over program operations and help assure continuity of 
services as staffing changes occur. 



Recommendation #3 

We recommend the department develop formal policies and 
procedures for the Licensure Bureau. 



Overall Bureau Priorities 



In addition to the lack of formal policies and procedures for 
licensure areas, we also found the bureau has no clear policy for 
establishing day to day priorities. As noted in Chapter III, we 
documented several areas of noncompliance. All bureau goals 
have not been addressed or fully developed and; therefore, staff 
priorities are continually changing. Bureau staff often react to 



Page 27 



Chapter V 

Licensure Bureau Administration 



immediate demands, rather than focusing on current bureau 
goals. This has resulted in delays in rule development and 
delayed inspections. Without clear priorities and established 
guidelines, bureau activities will be less effective. The depart- 
ment should develop a plan which addresses bureau priorities 
and helps assure compliance with all licensure requirements. 



Recommendation #4 

We recommend the department develop a management plan 
to establish bureau priorities. 



Licensing Fees 



The legislature established a licensing fee system in 1947 when it 
established a health care facility licensure program. The original 
fee was established at $10 per facility and increased once in 1967 
to $20 per facility. In 1975 the law was amended to require any 
facility planning to operate with more than 20 patient or resident 
beds pay an extra $1 for each additional bed. Department staff 
indicated limited funding has impacted the ability of the 
program to enforce its statutory requirements. Limited funding 
can restrict the staff and resources to actively regulate health 
care facilities. Based on our review, we believe there are three 
funding options that can be considered for this program. These 
options include: 

-- establishing fees commensurate with program costs; 

— establishing minimal licensure fees to cover processing costs; 

— establishing fees related to program costs. 



Fees Commensurate with 
Costs 



Page 28 



Although section 50-5-202, MCA, outlines the general licensing 
fees for health care facilities, section 50-5-227 (2), MCA, allows 
the department to establish separate fees for licensing, inspect- 
ing, and patient screening at personal care homes. These statutes 
also state personal care home licensing fees must be reasonably 
related to service costs. Currently, the bureau charges the 



Chapter V 
Licensure Bureau Administration 



standard $20 licensing fee. Although the bureau has not 
compiled data on program costs relating to personal care facility 
regulation, we calculated costs based on current bureau 
activities. We estimated total survey costs for personal care 
homes would be a minimum of $10,000 per year for all the 
currently licensed homes. Current fees only generate approxi- 
mately $600 per year. To be commensurate with costs, the fee 
should be at least $350 per year per home. 

However, if the bureau raises licensing fees for personal care 
homes to comply with the "reasonably related" provisions of state 
law, there will be inconsistencies in the current licensing fee 
structure. The personal care homes will be charged a higher rate 
to cover actual regulation costs, while other facilities pay a 
nominal fee. To make health care licensing fees commensurate 
with costs would require a substantial increase in current fees. 
For example, we noted in other states annual licensing fees were 
as high as $2,500 for some facility types. 



Minimal Licensure Fees to 
Cover Processing Costs 



As noted earlier, the health care facility licensing program was 
developed as a function of government to protect the safety and 
health of the public. As a result, this program has historically 
been funded with General Fund moneys. Although a minimal 
licensing fee is charged, these fees are deposited into the General 
Fund and do not provide direct program support. The current 
fees do not correlate to program costs. Current program opera- 
tions are budgeted at approximately $350,000 a year, but fees 
only generate $15,000 in income. The current fee structure was 
never intended to cover all program costs and appears it is an 
administrative and handling fee rather than a fee providing 
funds for any type of program support. If the legislature intends 
for this program to be a general function of government, then an 
administrative and handling fee is appropriate. However, the 
fee should cover the cost of processing licenses. For fiscal year 
1992-93, we estimate the administrative cost of processing 
licenses to be about $36,000. To cover these costs the average 
fee would need to be approximately $110 per facility. 



Page 29 



Chapter V 

Licensure Bureau Administration 



Fees Related to Costs 



Another option would be to establish fees at a certain percentage 
of program costs. For example, fees could be raised to a level 
which provides 50 percent of program costs and General Fund 
moneys could provide the other 50 percent. Fees could also be 
graduated depending on facility type. For example, bureau staff 
time to review hospitals may be higher than staff time to review 
an adult day care center. Fees could be related to the actual 
bureau costs associated with specific facilities. 



Under this option fees would not be the sole source of funding. 
Fees could be used to supplement the current level of funding 
and resources available for this program. This would create a 
program supported by both the general public and the health 
care industry. 



Conclusion 



In comparing this program with other licensing programs, we 
found some areas of regulation are self-supporting. For 
example. Building Code fees and occupational and professional 
licensing fees are set at a level to cover program costs. On the 
other hand, other services such as Food and Consumer Safety at 
DHES are funded through General Fund moneys, yet receive a 
portion of a license fee of $60 per food establishment, (section 
50-50-205, MCA). 



The current health care facility licensing fee structure has not 
been altered since 1975 and the base fee of $20 has not been 
changed since 1967. The value of $1.00 in 1967 is equal to a 
little less than 24 cents in 1992. Just to maintain the "purchasing 
power" of the license fee, the fee should be approximately $84. 

We believe the department should seek legislation to make all 
fees consistent and commensurate with program costs, or set all 
health care facility licensing fees to cover processing costs, or 
establish fees at a certain percentage of program costs. 



Page 30 



Chapter V 
Licensure Bureau Administration 



Recommendation #5 

We recommend the department seek legislation to: 

A. Establish fees that are consistent and commensurate 
with program costs; or, 

B. Set licensure fees to cover processing costs; or 

C. Establish fees at a certain percentage of program costs. 



Page 31 



Agency Response 



Page 33 



I-- 1^ i^ 



i y v/ ^ 



Marc Racicot 
Governor 



Office of the Governor 

State of Montana 




Mi 



".ILi m - 6 1994 ij 

:G-.;''1^:T[veai;d?to:?, 



State Capitol 

Helena. Montana 5962o-080i 



MEMORANDUM 



TO: 
FROM: 
DATE: 
RE: 



SCOTT A. SEACAT, LEGISLATIVE AUDITOR 
GOVERNOR MARC RACICOTV^y 
APRIL 6, 1994 

PERFORMANCE AUDIT RESPONSE. DEPARTMENT OF HEALTH AND 
ENVIRONMENTAL SERVICES. HEALTH FACILITY LICENSURE PROGRAM 



The Governor's Office and the Department of Health and 
Environmental Sciences (DHES) concur with recommendation number 1 
of the Performance Audit of the DHES Health Facility Licensure 
Program, dated March 1994. 

The Governor designates the Department of Health and Environmental 
Sciences as lead agency for health care facility regulation, and 
directs DHES, during fiscal year 1995, to formally coordinate the 
regulatory efforts and assure compliance with licensing statutes. 
DHES is also directed, during fiscal year 1995, to identify and 
clarify all related health care rules related to facility 
standards . 

The Department of Health is also directed to bring this audit 
recommendation to the attention of the Governor's Task Force to 
Renew Montana Government. 



cc: Dept. of Health and Environmental Sciences 

Dept. of Corrections and Human Services, Chemical Dependency 

Division 
Dept. of Justice, Fire Prevention and Investigation Bureau 
Dept. of Commerce, Building Codes Bureau 
Mental Disabilities Board of Visitors 
Montana Advocacy Program 
Dept. of Family Services, Aging Services Unit 

Page 35 



TELEPHONE: (406) 444-3111 FAX: (406) 444-5529 




DEPARTMENT OF 
HEALTH AND ENVIRONMENTAL SCIENCES 

DIRECTOR'S OFFICE 



COGSWELL BUILDING 

1400 BROADWAY 

PO BOX 200901 



STATE OF MONTANA' 



(406) 444-2S44 (OFFICE) 
(406) 444-1804 (FAX) 



HELENA, MONTANA 59620-0901 



April 7, 1994 



MEMORANDUM 



TO: SCOTT A. SEACAT, LEGISLATIVE AUDITO 



FROM: BOB ROBINSON, DIRECTOR 

DEPARTMENT OF HEALTH AND ENVIRONMENTAL SCIENCES 




RE: PERFORMANCE AUDIT OF THE HEALTH FACILITY LICENSURE PROGRAM. 
THE DEPARTMENT OF HEALTH AND ENVIRONMENTAL SCIENCES. 



The Department has reviewed the Health Facility Licensure performance audit and in general agree with the 
recommendations of the audit. We would also like to recognize the work done by the audit team and their 
endeavor to analyze and accurately portray the performance of a highly complex program. 

As noted in the audit report, the Health Facilities Division was created in May 1992 to effect management, 
financial and performance improvements. The primary goals of the reorganization were: 1. to shorten the lines 
of authority and enhance direct access to the Department Director, 2. to insure the proper expenditure of both 
Federal funds on Federal programs and General Fund to State Licensure and 3. to dedicate general fund dollars 
for the oversight of health care facilities that are the responsibility of the State. 

As a result, the managerial practices and the performance of the division have been continuing to improve. As 
the following responses indicate, we believe the implementation of the performance audit recommendations will 
continue our process of program improvement. 

Recommendation tf2 

A. Identify program and staffing information needed to make management and policy decisions. 

B. Accurately collect and update facility information. 

Response: Concur 

A. The Department will enhance the current information system and the completed system will be designed to 
gather data that will identify program needs, staffing levels and will help guide management and policy decisions. 

Page 36 



CENTRALIZED SERVICES 

DIVISION 

(406) 444-2442 



ENVIRONMENTAL SCIENCES 

DIVISION 

(406)444-3948 



HEALTH FACILITIES 

DIVISION 

(406)444-2037 



HEALTH SERVICES 

DIVISION 

(406) 444-4473 



B. The Certification Bureau currently operates several facility data systems. We have reviewed these systems 
and intend to use the best parts of the certification systems to design a facility information system that will 
meet the needs of the Licensure Bureau. 

Implementation of items A and B will be completed by June 30, 1995. 



Recommendation ff3 

The Department develop formal policies and procedures for the Licensure Bureau. 

Response: Concur 

Since the reorganization of the Bureau in May of 1992, the Bureau staff have been drafting policies and 
procedures. A large segment of the initial work had been completed at the time of the audit. The Bureau will 
continue the development of the draft policy and procedure manual. The final manual will replace the present 
interim policies. 

Implementation of recommendation #3 will be completed by December 31, 1994. 

Recommendation ffA 

The Department develop a management plan to establish priorities. 

Response: Generally Concur 

The Department believes that it has only limited authority to set priorities, and believes it is required by law to 
follow the Statutory requirements as determined by the legislature. 

The Department will continue to develop management strategies to meet the legislative mandates and will also 
continue to request from the legislature adequate funding to meet the current and new law, as well as submit 
legislative proposals that identify alternatives to additional funding. 

Recommendation #5 

The Department seek legislation to: 

A. Establish fees that are consistent and commensurate with program cost; or 

B. Set licensure fees to cover processing costs; or 

C. Establish fees at a certain percentage of program costs. 

Response: Generally Concur Page 37 



The Department agrees that recommendations A and C may be alternatives that would provide adequate funding 
to support the Bureaus' need for additional resources. The Department believes, however, that such legislation 
is an important public policy consideration relative to who should bear the cost of protecting public welfare. 
Such legislation is properly generated by the legislative audit committee or by the appropriation sub-committee. 
The Department would offer technical support needed for such legislation. 

B. The current licensure fee is sufficient to cover the cost of processing the facility license. 



Page 38